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  • Plant Size Cash Outlay Demand Prob. NCF Encf Years 1 - 10: Case 12.2: Weston Plastics Company

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    Mukul Kadyan
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    This document summarizes a case study evaluating the net present value of expanding a plastics plant. It provides the probabilities, cash flows, and net present values for three options over a 10 year period: building a large initial plant, starting with a smaller plant and expanding later, or remaining small. The analysis finds that starting small and expanding has the highest expected NPV of $21.47 million, making it the best option.

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    This document summarizes a case study evaluating the net present value of expanding a plastics plant. It provides the probabilities, cash flows, and net present values for three options over a 10 year period: building a large initial plant, starting with a smaller plant and expanding later, or remaining small. The analysis finds that starting small and expanding has the highest expected NPV of $21.47 million, making it the best option.

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    8 views2 pages

    Plant Size Cash Outlay Demand Prob. NCF Encf Years 1 - 10: Case 12.2: Weston Plastics Company

    Uploaded by

    Mukul Kadyan
    This document summarizes a case study evaluating the net present value of expanding a plastics plant. It provides the probabilities, cash flows, and net present values for three options over a 10 year period: building a large initial plant, starting with a smaller plant and expanding later, or remaining small. The analysis finds that starting small and expanding has the highest expected NPV of $21.47 million, making it the best option.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 2

    Case 12.

    2: Weston Plastics Company

    Years 1 - 10
    Plant Cash
    size outlay Demand Prob. NCF ENCF
    H 0.5 12.50 6.25
    Large 50 M 0.4 10.00 4.00
    L 0.1 5.00 0.50
    10.75
    Discount rate 10% PVFA 10, 10% 6.145
    PV (NCF) 66.05
    NPV 16.05

    Initial (1 - 2 years) Year 2 Years 3 - 10 Yr 3-10


    Plant Cash Cash
    size outlay Demand Prob. NCF Plant size outlay Demand Prob. NCF ENCF
    H 0.6 14 8.40
    H 0.5 8 Expansion 30 M 0.3 11 3.30
    L 0.1 8 0.80
    12.50
    PVFA8,10% 5.335
    Small 20 M 0.4 8 Expansion 15 H 0.6 11 6.6
    M 0.3 8 2.4
    L 0.1 2.5 0.25
    9.25
    PVFA8,10% 5.335
    L 0.1 4 L 1 4 4
    PVFA8,10% 5.335

    Year 1 Year 2
    Prob. NCF ENCF NCF ENCF
    H 0.5 8 4 8+36.69 44.69 22.34
    M 0.4 8 3.2 8+34.35 42.35 16.94
    L 0.1 4 0.4 4+21.34 25.34 2.53
    7.60 41.82

    Year 0 1 2
    ENCF -20 7.60 41.82
    PVF 1.000 0.909 0.826
    PV -20 6.91 34.56
    NPV 21.47
    Yr 3-10

    NPV

    36.69

    34.35

    21.34

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